Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Community Affairs Legislation Committee - 21/08/2014 - Social Services and Other Legislation Amendment (2014 Budget Measures No. 1) Bill 2014 Social Services and Other Legislation Amendment (2014 Budget Measures No. 2) Bill 2014

ROOT, Ms Josephine, National Policy Manager, COTA Australia

YATES, Mr Ian, AM, Chief Executive, COTA Australia

Committee met at 08:49

ACTING CHAIR ( Senator Smith ): I declare open this public hearing and welcome everyone here today. This is a public hearing of the committee's inquiry into the Social Services and Other Legislation Amendment (2014 Budget Measures No. 1) Bill 2014 and the Social Services and Other Legislation Amendment (2014 Budget Measures No. 2) Bill 2014. The committee has received 63 submissions to this inquiry, and I thank everyone who has made a submission. I am joined today by Senator Siewert and Senator Moore, and Senator Peris will be joining us later via teleconference.

I welcome representatives from the Council on the Ageing. Information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. The committee has received your submission, submission No. 59. I invite you to make a short opening statement. At the conclusion of your remarks, I will invite members of the committee to put questions to you.

Mr Yates : Thanks to the committee for inviting us to appear today. I will commence with a minor but important correction. On page 3 of our submission, the penultimate paragraph, which starts 'On 28 April', makes two references to the year 2014 which are clearly incorrect. It should be 2017. We have provided the secretariat with an amended copy of the submission and we hope it is possible to exchange that on the website.

I also just note that we will talk today about age pension issues, and we do not have a long time for conversation. That does not mean that COTA does not have views on other social security measures. But we have left others to make statements about those. Many of our views on those other issues accord with those put forward by ACOSS, of which we are a member, although there are some differences between ACOSS and us on age pension matters.

I will briefly address some key aspects of the submission, but we have given you quite a substantial submission and we hope you have had some time to read it, although we are aware of the workload of this committee at the moment, given that we have made submissions to most of its current inquiries. Then we want to leave plenty of time for questions and answers.

As an overall comment, we would like to make it very clear that these measures will have a serious and material negative impact on pensioners and indeed on others. The greatest impact will be on the most vulnerable—full pensioners with little or no assets and income. I would mention in particular there, of course, that people who are in the private rental market will be particularly affected. But all full pensioners will receive a very substantial impact, particularly as the indexation changes roll out, if enacted. That impact grows over time, and it has no end point in terms of the government's current policy, in contrast, for example, to the Commission of Audit recommendations, which I will touch on. The Commission of Audit essentially argued for a slow 20 per cent cut to the pension, a cut that would occur over a series of years, using a mixture of CPI and PBCLI, and it would then peg it to a wage index. They chose the wrong wage index, but in principle the Commission of Audit said, 'You reduce the pension and then you stop.' These changes do not. They have no floor to them. They just index to the CPI.

We would also make the point that, to our knowledge, there has been no what we would call due and proper policy process. There is no articulated argument as to why pensions need to be reduced, when other things are not. As noted in our submission, it was widely understood that age pensions may be reviewed post the McClure review. The McClure review on working-age payments was announced early, and we had anticipated that there would be a proper review of pensions and had been arguing to the government that that should be broader and be a retirement incomes review.

If the argument is that pensions need to go down in terms of Commonwealth expenditures because of a fiscal crisis, we do not think that is a sufficient argument because it does not consider a range of alternatives to actually asking the lower paid and most vulnerable in our community to carry a very heavy load. The most obvious question to ask is: why take dollars off pensioners while continuing superannuation tax concessions that for hundreds of thousands of higher income people exceed the cost of the pension? In fact, we note that the Financial System Inquiry, which spends about a third of its interim report on superannuation and retirement incomes, notes that people can receive superannuation concessions up to five time the value of the single pension—and they are using government figures in making that comment.

COTA has been, and is, urging the government to hold a retirement incomes review that covers pensions, superannuation and taxation in retirement in an inclusive and interconnected way, including consideration of asset and income testing, the preservation age and so on. We are asking that the pension changes be halted, be frozen, until that retirement incomes review is complete. We believe it could be done by the end of next year, so it certainly can happen within the time frame of these changes anyway.

Just a few comments about indexation—we have spent a lot of time in this submission putting forward information and argument on this matter. It has the single biggest impact of any of the measures, and, as I have said, it goes on. If it had been in place since 2009, then the $30 increase which was bipartisanly argued for—or multipartisanly argued for, with due reference to the deputy chair—would be gone. On Commission of Audit figures—and we note that we are working off a very basic graph in the Commission of Audit report that does not have supporting tabular information—in 10 years the pension would be lower by at least $80 a week than on current indexation arrangements. That is well over $4,000 a year. It would actually be more, because they use the better of the consumer price index and the pensioner and beneficiary living cost index, whereas this just would take CPI. Budget savings from this measure will be in the billions.

I guess what we would also say is: if we want to see the effect of the indexation, let's look at Newstart, because that is how Newstart is indexed. I think it is fair to say that Newstart has been commented on by a number of parliamentary inquiries, and indeed by the Henry review, as being significantly lower than is, by any measure, adequate.

With regard to the change to the age of eligibility for the pension, we think there actually is a sound demographic argument for an increase, in terms of longevity, all other things being equal. Our principal issue is that unemployment amongst mature-age workers is still very significant. Age discrimination is clearly rife—it is not just us saying that; the surveys are showing that clearly. Indeed, the Minister for Employment, Senator Abetz, said so at the launch of Commissioner Susan Ryan's latest campaign, the Power of Oldness, earlier this week. Twenty-five per cent of Newstart recipients are older workers; one-third of the long-term are. In addition, the current estimates are that there are at least 65,000 mature-age 'discouraged workers' who are not even counted in Newstart.

So, as we said, Newstart is far too low. The key issue with raising the age is that you are actually consigning those people to stay on that lower figure for a longer period of time. We think that actually a series of incentives and the removal of obstacles to increased participation would lead naturally to a significant uplift in workforce participation over the age of 65 anyway. It is already trending that way.

Just briefly, with regard to the means test, COTA has repeatedly indicated its preparedness to discuss income and assets testing and that that ought to be a key focus.

We believe that it is a more legitimate focus of any review of the pension than the indexation area, because there is some legitimate community concern about people with significant assets receiving a part-pension, albeit not a huge amount of part-pension, but the pension supplement component continues right through as long as you have got any eligibility. We would note that the current design of the pension system is not the legacy of the previous government but in fact is a longstanding legacy of the Howard and Costello period, when the eligibility criteria for income and assets testing were extended.

We would note that we would probably have agreed to the measure for freezing the income and assets test for a period if it had been in conjunction with the retirement incomes review. If you wanted to say, 'Let's call a halt now while we do the review so it does not keep going,' that might have been wearable but to project it out, it is a very crude tool. Finally I should acknowledge that today we have been in the media, launching a Hands Off the Pension campaign. We have done so with some reluctance as we have been hoping to negotiate an agreement to a retirement incomes review, which we have been pressing the Treasurer about, and put the pension changes on hold. However, pressure from our own members and the wider constituency to do something has meant that we needed to do something now.

We would hope that this committee might seriously consider our recommendation that these measures be held aside while the retirement incomes review is undertaken. Such a review should be public and should involve key stakeholders. I would note that, over recent days, the financial systems inquiry—which I earlier noted spends a large amount of its report on the retirement incomes space—has had held roundtables in Sydney, on superannuation and retirement incomes generally, with a wide range of stakeholders. I would say that those discussions, while they were in-house discussions, indicate to us very clearly that there is a substantial basis for believing that a retirement incomes review could come up with an architecture for the retirement incomes space that would have substantial consensus across key players in the process—and dare I say, maybe lay the groundwork for symbolic bipartisanship or multipartisanship about the basic infrastructure of a retirement incomes policy while parties might then compete about bells and whistles.

Josephine Root may wish to add a few points.

Ms Root : No, that is fine, thank you.

Senator SIEWERT: Your submission is very comprehensive, thank you; it contains a lot of really useful information. I want to start in terms of consultation and ask: what has been the process of consultation, if any, with the government, government agencies or ministers, about the changes that are either in the budget or along the lines of what you were just talking about in terms of the retirement income review?

Mr Yates : Thank you, Senator. As the committee is aware, because we attached our letters to the Treasurer and the Prime Minister, there was quite a lot of public discussion generated in the period March-April, essentially from the Treasurer making public comment—sometimes from Washington, once from the G20 Finance Ministers' media conference—about the pension. So we wrote to him and said that we would really like to have a conversation about this and it is not productive to just do it in the public arena. We then wrote to the Prime Minister and we made very strong points in our letter which was followed by the Prime Minister making the announcement that if there were going to be any pension changes they would not apply until 2017. We then saw the Treasurer a couple of days after that announcement, when we presented, and we thought he took sympathetically, the proposition of a retirement incomes review—and indeed we issued a media release that, due to the confidential nature of the discussion, we had to clear with his office and that indicated that there should be further such discussions about a review. So far we have not seen that advanced. Clearly the financial systems inquiry can go a certain distance, but it itself notes that its terms of reference do not allow it to go into the transfer or tax space. There is ongoing discussion about a tax review but no-one quite knows when that is going to happen and how it would happen.

And I would emphasise again that what we have been saying all the time is that you have got to get a buy-in of key players. This was very obvious at our recent national policy forum, where we had a number of the think tanks and people who had been putting out their solution to retirement incomes. There is not one solution. You actually have to have a lot of players get around, agree on the facts, start to agree on the things that they have in common and then narrow down the areas of difference—and get real data in front of us. How much is saved by doing X or Y? What are the impacts of that?

None of that has happened. There was certainly no consultation prior to the budget, and frankly we were very surprised when the age pension changes were in the budget because our overall impression was that the government would come to that at a later point and would involve people in that process.

Senator SIEWERT: I have had a lot of phone calls to my office about people concerned about both the increase in the retirement age and the indexation and expressing concern. What has the response of your members been to all the changes that affect age pensioners?

Mr Yates : Jo might like to add to this because she takes a lot more of the direct calls than I do. The response has been continuous since the morning after the budget and a great of deal of alarm amongst current pensioner members and constituents—and we take a lot of calls from people who are not our members as well. Indeed, I would say that many of our member organisations and their members are raising it with us. We met recently with quite a few of those organisations in our offices in Canberra. They do understand what the pension indexation change will mean.

The concern about the age is more in the younger end of the membership. Our colleague organisation National Seniors Australia would attest that there is a concern in their constituency, many of whom are still in the workforce, about the age issue. At the same time, we have many of our members working longer and wanting the impediments to doing that to disappear, but obviously they cite jobs and personal situations that make that difficult. As I said about the unemployment situation, many members will tell us how many times they have applied for jobs, and they just do not get off first base really.

Ms Root : I might add that COTA is also a member of the Fair Go For Pensioners Coalition. Across the members of the Fair Go For Pensioners Coalition—consumer organisations, community organisations like COTA and retired unionists, and ethnic communities are the three groups that make up the membership of Fair Go For Pensioners—there is great concern about the changes to the indexation. People believe that they will lose the gains that that coalition fought very hard for in 2008-09. They thought they had got a win; they feel that that has been taken away from them. And it does mean that they will have to make decisions: 'If it gives $80 a week less, then, in real terms, what won't I have from that $80?' People do get it. People are very concerned. They can see that they had thought they had got a rise up in their standard of living and were finally were going to inch out of poverty, if you like, and they are going to go back into it.

Senator SIEWERT: Can we go there. I want to go to older workers in a second. It is not exactly the life of Riley. Although the age pension is significant when you are on a low income—significantly above Newstart—but people are not living the life of Riley on the age pension.

Ms Root : No. The single age pension is below the ASFA—the Association of Superannuation Funds of Australia—benchmark for what a modest level of living would be and significantly below the comfortable. I think the group that we have most concern about is the non-homeowners. If you do not own your home, you are at a significant disadvantage, and the ASFA benchmark does not include any costs for rental in its thing—so you would have to add an extra $200 a week at least. So those are the group that are the most vulnerable—and single people on the pension as well.

Senator SIEWERT: And a lot of these single people are women?

Ms Root : Yes.

Mr Yates : Yes, and the other thing is, of course, that these are people who have not benefited from the super in any significant way—

Senator SIEWERT: Exactly, yes.

Mr Yates : Without them naming anybody, there was a proposition raised at the roundtable the other day that we need not just to focus on people who have got—what do you do about people with significant super? If you have a superannuation balance of $100,000, which is not huge—it is below the average but above the median, and certainly above the average of those in industry super funds—it is possible to commute that into an income stream that actually would be around about $5,000 a year. Now $5,000 a year is not a huge amount of money, but I would make the point: it would make a 25 per cent increase in the standard of living of someone on the single age pension. But that person with that $100,000 will not have benefitted at all, probably, from tax concessions on super, whereas people with large balances will have substantially.

Senator SIEWERT: Can I just take us back to the number of people in private rental. Do you have any figures on whether that is going to worsen or improve?

Ms Root : Well, unless we see something dramatic happen in the housing market I would suggest to you it is going to get worse. There is a rise in older people who are moving into homelessness, or are at risk of homelessness—women in particular. They are the hidden homeless, if you like: they are couch surfing, they are moving into unsafe and insecure accommodation arrangements. Anglicare do their snapshot of every year and look at what is affordable, and that has not shown any improvement. With the recent moves to get rid of NRAS and to not do anything about the supply of affordable housing, we see access to affordable housing as the real risk, even if the pension did not change, but certainly if the pension goes down. As the pension is indexed to CPI, rents usually rise at above CPI. So I think there is a growing gap there.

Senator SIEWERT: And it is different in different cities too. In Western Australia it has been worse. Affordable housing in Perth has got worse during the mining boom, for example, so I know from Anglicare's survey that it is different in different cities as well. In terms of the issue around older workers, you make a comment in your submission about the government's Restart wage subsidy program. What else do we need to do? Is that enough, or what else do we need to do?

Mr Yates : What we have said about Restart is that, in terms of the fact that there is some impact of wage subsidies, this is probably one of the best that we have seen. In amount it is substantial and it is paid in stages so you cannot cut and run. It should reduce the churn impact of those. But all of the research that we have looked at and evidence that we have listened to says that this is a really in-built cultural problem and that you have to tackle it by a mixture of incentives; community education and awareness raising about discrimination; stronger laws on discrimination, which we supported in the previous government; and training and retraining opportunities that are targeted to the mature-age context. One of the arguments that we have made there is that actually early intervention is the most effective tool in trying to work with someone. If you wait until they become long-term unemployed, you have got another whole layer of issues already added to it. So that was the point we put when we met with the Treasurer, and the Treasurer did seem to acknowledge that maybe they needed some more effort in the training and retraining area.

Senator SIEWERT: I do not know if you have had the chance to look at the new employment tender process that government announced about three or four weeks ago. Have you had a chance to look at that? Ms Root, for the record, is shaking her head. I presume that means you have not had a chance to look at it.

Ms Root : No, we have not looked at it.

Senator SIEWERT: Okay. Maybe when you do, it would be useful for us to get some feedback.

Mr Yates : We would be happy to do that. I would note that we have basically been spending night and day responding to all the range of current inquiries.

Senator SIEWERT: Yes, I can appreciate that.

Mr Yates : This committee and a number of other committees.

Senator SIEWERT: That is one of the points. These changes cannot be taken in isolation from all the other changes that are occurring, to which you just made reference in terms of GP co-payments and employment related changes as well.

Mr Yates : In terms of your comment that you do not live the life of Riley on the pension and particularly the single pension, can I just say that without detracting at all from the discussion we had about people in the private rental market, we would firstly comment that with the pension situation now those people are under significant pressure. The pension review in 2009 self-confessedly did not deal with rental assistance issues and pointed to the need for government to tackle affordable housing.

As we have made the point in the submission, the Australian public pension system is not extravagant. By any comparable country standard it is modest. It is in regarded on international measures as one of the most sustainable. Some people live modestly okay on it and others have difficulty, because there are different circumstances. It is not something that is an overly generous system by any kind of standard. I have had people say to me, 'I know someone who is on a full pension and they save some money.' Actually, most of us need to be able to save a little money for things like when the water heater blows, for example—or maybe it would be nice to travel from Adelaide to Sydney to see the grandchildren once every couple of years or something like that. We do not regard that as some kind of luxury of life. We do have a quite modest age pension system if you are totally reliant on it.

Senator MOORE: Certainly in your submission you have talked about cumulative effect of a number of the processes. In the range of initiatives that have come in in this budget, not just in the social services space but in the health space, there just seems to be no message from government about what that means to individuals across the board. Has that been an issue that has been raised with your membership—that is not just one thing: that they are actually quite fearful across the board?

Ms Root : Yes, that is quite clear. We have put submissions into the inquiry into PBS co-payments. When we responded to the budget initially Ian made the point and we made the point that it is a cumulative effect. People are saying that they feel under siege, if you like. This is why they put pressure on us to do the Hands of the Pension campaign, because they feel that is something tangible that we should be taking action on, even though it does not happen in three years. But some of the other measures do. So they will, if you like, creep up on them. First of all I will have to pay this and then I will have to pay that and then my pension will not go up by as much as it might have done. It is that cumulative effect that people are scared about. They tell us they look at their future and they can see themselves sliding back and making it harder and harder to make ends meet.

Mr Yates : Just to broaden that a little, as members of this committee will recall, COTA has played a strong lead role in terms of aged care reform. Some of the measures introduced by the previous government and supported by the now government lead to, for example, part pensioners paying more towards the cost both home care and residential care. We have supported that, which has been a difficult journey for a consumer organisation, because we understand that, where there are some capacity to pay, people should be asked to do so. We have supported a range of other things like better access to equity in the home in later life for that purpose.

But I just make the point. We emphasise full pensioners, but if you talk about part pensioners, their total income envelope—and it is the extra income that gets measured in that income testing—shrinks if their part pension goes down. So it affects even things like introducing user pays into aged care. Then in terms of interconnectedness, I think we have made the point in here that both in terms of residential care and home care consumer payments are related as a percentage of the pension. No-one has done any calculations of the impact on aged care providers 10 years out. When I raised this with officials soon after the budget, after they had stopped and thought for a minute, they said, 'That is a long time away and people will not be thinking about that.' I said: 'Well, I know a significant number of large for-profit providers who are looking at how they make the investment that we will need for residential care into the future, and they are doing that now, and their banks are looking at 20- and 30-your projections. Those things are quite material.' The impact on the pension of that indexation change 20 or 30 years out is really material to an investment decision. But none of that has been worked through.

Senator MOORE: Mr Yates, you said earlier in your comments that your members and people in the community are really clear about the impact of indexation. They understand how it works and they understand the impact on them. You would know over the last couple of months there has been a debate in the public space about the fact that pensions have not actually been decreased—that is actually just a change in the way it is being looked at. That debate has got quite vicious at times. What has been the impact of that in terms of the view in the community?

Mr Yates : Firstly, I think I should clarify that I do not think all people are aware of it. I would just say that it is clear to us and we have seen some survey material that indicates, too, that many pensioners at least are aware that indexation change will be significant. That is because they understand that the indexation arrangements now in place have meant that they tend to keep up rather than keep falling behind. We have not had a huge amount of response but the response that we have had is to say: 'Yes, the pension will be indexed by the CPI but it will not keep up with living standards. It will mean'—as Joe said earlier—'that I will have to make a much more difficult choices over time about what I can afford.' They understand that. We had quite a few members raise a concern about the letter that was in the latest Pension News issue in which the point about indexation was made. In every area of expenditure in life we know that nominal value is not terribly relevant; it is actually what is the real value over time. That is what will be affected. That has been established in review after review.

Ms Root : And, if I may, only yesterday we got an email from somebody commenting that they were in one of the defence pension schemes. There are two lots of veterans, one of which will have just achieved better indexation and will maintain it—they will have been brought into line with age pension indexation and after the age pension indexation changes they would stay on the higher rate of indexation; but there is another group that did not get the increase up to the age pension. I can never remember the name of the scheme, so I am not even going to try. They did not get the move. They are on CPI. This gentleman wrote to us saying, 'Wow, we've been pushing to get the same as the age pension and now we have!'

Senator MOORE: That is right. Exactly.

Mr Yates : So people do understand it.

Senator MOORE: I am interested that there was this debate and it was almost as though—and certainly some of the people contacting my office felt—their intelligence was being dismissed in terms of this argument that, 'Of course your pension is going to go up.' But they know the figures about how indexation operates.

Ms Root : They look at what has happened to Newstart and that has been very much in the public arena. They can see that they have done better than people on Newstart, partly because of better indexation. So people do get it.

Senator MOORE: A couple of years ago, when the Fair Go for Pensioners group were arguing so strongly for changes around pensions, which led to the Harmer review and that process, there was a great amount of public engagement in that campaign. I remember very clearly being on the end of a talkback radio interview, and it was very direct about the need of pensioners. I have not felt that degree of response so far in the community. It could be because so much is going on. You would both remember that that campaign went over a period of time and it did get media attention; it did get high-profile engagement. I know that you have started an ongoing campaign, and you have put a focus on it today, but do you sense that there is any change in the view of the wider community around these issues that were so very public in 2008-09?

Mr Yates : You are right, although I think it lies somewhere in between.

Senator MOORE: Often things do.

Mr Yates : The dilemma that we have is that the decision by the Prime Minister to say that these changes would not occur until 2017 is a bit of a double-edged sword. Obviously we are pleased that it is there but it has kind of made people think that it is a bit in the distance. We have found a significant lack of awareness of the fact that these bills have passed the House of Representatives, that they are halfway through, if you like, the parliamentary process. I understand that, if you read it really carefully, what the Treasurer said is technically correct, but there was media just in the last 24 hours where the Treasurer said, 'We will be taking pension changes to the next election.' So I do not think there is an awareness that, if the Senate passes it, it is then the law and someone would have to change it. I think people think it is a debate still to be had.

I note that it has not occupied a great deal of media in terms of the very public discussions between the government, the minister, and the crossbenchers in recent times. It is more about environmental legislation and other issues, rather than this. But we will certainly be asking all senators to really think about this seriously. When you talk about that engagement, I would note that one of the strongest proponents of the $30 increase was in fact the coalition, and many radio interviewers on the networks that across Australia—the Macquarie network and others—have commented to me that their local coalition member attended many meetings about raising the pension by $30. As we have noted, that would have disappeared if these arrangements had been in place by now. That is what I think some of our people are just finding a bit bemusing.

Senator MOORE: And also just the range of change.

Mr Yates : Absolutely, the range of change.

ACTING CHAIR: Mr Parkinson, the secretary of the Treasury, has talked about falling living standards if structural changes are not undertaken in regard to the budget. Would you agree with that statement?

Mr Yates : We are happy to accept that there need to be structural changes to the budget. Our question is quite simply that these measures are disproportionate for the vulnerability and capacity of the target group that is pensioners and particularly for pensioners. We have indicated quite clearly—and I have again this morning—that we are open to a conversation about income and asset testing and the fact that you could, if you like, compress the eligibility for the pension so that some of the people who have quite significant assets—and I am not bringing the family home, or principal residence, issue into that, although we would again say that is a legitimate conversation; it is a practically difficult issue but it is a legitimate conversation to be had. And then, as I said, when you look at the whole retirement income space, one of the issues is that this country has to get its head around whether the superannuation system is a system where taxpayers subsidise well-off people to accumulate further wealth or whether it is about the provision of retirement incomes over a period of time and what is the appropriate public level of subsidy for that. So what I am saying is it is about comparison between the weight the pensioners are paying versus other people. It is a fairness and equity issue.

ACTING CHAIR: In your response, you mentioned that your concern was that it was disproportionately falling on pensioners. You would agree that pensioners, as a subset of the broader Australian community, should be making a contribution to correcting the structural challenges in the budget?

Mr Yates : We have no issue with the idea that everybody in the community, according to capacity, should contribute. But this is not a proportionate response. I also think we need to be clearer and there needs to be a clearer dialogue about what the nature of the structural issues is. We have had very little discussion about revenue. Unfortunately, and this may surprise some people, we think that some aspects of the discussion of the fuel excise changes do not take into account that we do need to address revenue issues going forward. There has been a significant drop in public revenues and we need to have a fairly open discussion about that too, as well as on the nature of progressive versus regressive—

ACTING CHAIR: Are you supporting the fuel excise budget decision?

Mr Yates : We think the decision is not unsound economic policy. We thought, at the time the change was made by the previous coalition government, that it was not a sound economic decision. If we are going to increase the cost of fuel and then cut back pensions, it is going to make it hard for pensioners.

ACTING CHAIR: I will come to cost-of-living issues in a moment. The Governor of the Reserve Bank, Mr Stevens, said that he regarded the budget as 'a prudent and sensible strategy'. Do you agree or disagree with that?

Mr Yates : I think the Governor of the Reserve Bank is commenting in macroeconomic terms—

ACTING CHAIR: That is very fair comment. He is.

Mr Yates : and not commenting on individual budget measures. What we are talking about today are particular budget measures.

ACTING CHAIR: You are obviously familiar with his statement. But I am asking whether you agree with his comment that it is a prudent and sensible strategy?

Mr Yates : We do not have a formal position on that. I do not think whether we do or not is directly relevant to the issue we have before us today, which is the proportionality of the impact on pensioners.

ACTING CHAIR: But the measures we are discussing today are part of a series of measures, not just in the Social Services portfolio but across government, aimed at correcting some of the structural challenges that the new government has inherited. I am happy to be corrected, but I cannot see anywhere in your submission where the abolition of the carbon tax is identified as having a positive effect on cost-of-living pressures and therefore cost-of-living pressures for pensioners. Further, nowhere in your comments over the last little while or even in the media commentary have I seen even a reference to the abolition of the carbon tax. I would have thought, just in the interests of balance, that might have been at an important contribution.

Ms Root : The abolition of the carbon tax has not figured, for our members, as an issue of interest or importance. In fact, to the extent we have had correspondence on it at all, most of the people have said that they do not think it should have been abolished. That might be because—

ACTING CHAIR: Pensioners do not think that the carbon tax should have been abolished?

Ms Root : That is certainly what they have said to us. Many of our members are very strong on the need to address climate change and take measures to mitigate it. We have a group called the Green Sages in COTA Victoria who are dedicated to that process. It might be that they do not see—

ACTING CHAIR: Would that be representative of Australian pensioners, do you think?

Ms Root : It may not be representative of Australian pensioners, but you asked us about our members. When we held an election forum in the ACT in 2010, which about 150 people attended, eight of the 10 questions were about climate change. These were older people, not only COTA members, asking questions of people standing for office. Eight of the 10 questions were on climate change and they were from people wanting action on climate change—not on pensions or health or anything like that. I think it is fair to say that pensioners got adequate compensation for the carbon tax and they kept that compensation, which was a decision by the government—the clean energy supplement, later called the energy supplement. So they have not been impacted. They were compensated and then they kept that compensation when the carbon tax was repealed. However, we have yet to see the impact of the carbon tax removal on people's bills. People have had notification that electricity bills will go down because of the carbon tax repeal but then will go up because there were price rises anyway. So I think that possibly they would see the benefits, but that is not something they have communicated to us. That is all I am saying.

Mr Yates : And that space is complicated by things like the renewable energy target debate, in which the members are being told that their prices might go up. So it is complicated. What I would say is that, if we had a positive response to our call for a proper retirement incomes review, these are all the kinds of facts that could be on the table in that context.

ACTING CHAIR: My next questions go to the issue of the retirement income review. I have been at policy gatherings and public events where there has been broad discussion about the importance of a review into retirement incomes. Why couldn't your call for a retirement income review fit into the tax review that is being considered by government? You mentioned it—and I think it is referenced in your letter to the Treasurer. Would that be an appropriate place or an inappropriate place for a review of the retirement income issue?

Mr Yates : Since we do not know the terms of reference of that review, it is difficult, but conceptually I would just say that at the moment what we are talking about seems to fit in that little space between the financial systems inquiry, what McClure was talking about and the tax review. Certainly we have called for the tax measures bit to be part of such a review. There are a number of ways it could be approached.

What I would say is that, by that, we do not mean a little Treasury task force that goes away and does some work all by itself and does not engage with stakeholders. You will recall the kind of coalition effort that went into getting the aged-care reform process up and the broad consensus across a range of stakeholders. We would not have got that age-care reform out of the previous government if we had not had that kind of consensus. What we are talking about is trying to get some consensus among the industry, the stakeholders et cetera about it, with that whole interconnection, because they do interconnect, to see if, for the benefit of both major parties, we can actually have a platform where a lot of the architecture is agreed for a while. Then we would have the chance for retirement income stability, which is an overriding concern that both current retirees and prospective retirees raise. But you will not get stability while people perceive significant unfairness. That is a view from the technical experts involved in, for example, the FSI's discussions as well as ours.

ACTING CHAIR: It is true, though, that there will be no change to the pension in this term of parliament. That is a correct statement, isn't it?

Mr Yates : As far as we know now, that is the current setting, yes.

ACTING CHAIR: And the pension will continue to increase twice a year.

Ms Root : Yes.

Mr Yates : The pension—not necessarily.

ACTING CHAIR: In March of this year the pension increased by $14.30, I think, for singles a fortnight and it increased by $10.84 for couples a fortnight. And it will increase again in September.

Mr Yates : In nominal value, yes, correct—although, if CPI were zero, it would not increase. And that has happened.

ACTING CHAIR: This probably is not the place for it, but I found the commentary around the carbon tax very remarkable—

Ms Root : We were surprised as well.

ACTING CHAIR: because it does not fit with my personal experience, and I would be very, very confident to argue that it does not fit with the experience of many other parliamentarians taking electorate calls and visiting pensioner groups or other groups across the community. If there is any information you can provide me on that, I would be very, very interested to read it.

Mr Yates : Ms Root has reported factually what the response has been. I have no difficulty that, if we were to survey the members, we would find a variety of views.

ACTING CHAIR: I do not doubt that.

Mr Yates : What I would say is that the impact of the carbon tax abolition and other changes will feed through one way or another into CPI, into PBCLI and, indeed, into wage increases. So if in fact they rise less quickly, we will see that impact in here. What we are talking about is the architecture of the age pension in that environment.

Senator MOORE: Regarding the two big bills we have before us, it seems to me that the changes to he pension are all focused on 2017, and the changes to the other payments range from 2014 to 2015, and it is an immediacy.

Mr Yates : Yes.

Senator MOORE: What do you think the reason is for that difference?

Mr Yates : The objective reason is that following representations from ourselves and others, the Prime Minister announced that any changes to the age pension and other pensions, predominantly, would be put off until 2017, in keeping, I think he said, with his election commitments.

In terms of election commitments around both the pension and superannuation, we believe, and we would be strongly advocating this, that that does not preclude government having a retirement income review in this term, which could come up with an architecture that, as I said, we just might get some bipartisanship about, and it could go to the next election.

Senator MOORE: You and many other people who have submitted to this inquiry have said that seeing there is already the ongoing McClure review, which I know you have had a role in, your demand for a focus on retirement, in terms of some kinds of review, is that changes should be put on hold until after you have the evidence from such consultative processes. Is that still your position?

Mr Yates : That is our position, because we think it offers the best chance of moving forward in what is a very complex area. At the moment, the changes that have been announced affect the most vulnerable. That is our concern.

ACTING CHAIR: Thank you for your evidence.

Mr Yates : Thank you again to the committee for the opportunity to attend.